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Motilal Oswal
Pidilite Industries (Neutral)
Target: ₹1,385
CMP: ₹1,492.95
In a presentation in our Annual Global Investor Conference recently, Bharat Puri – MD of Pidilite Industries, highlighted two factors that could drive transformational change at the company level:
‘Growth’ and ‘Pioneer’ categories would lead to contribution -- increasing from around one-third of sales combined to around half of sales over the next three to four years. This would provide significant impetus to the topline over the medium term, something that has been lacking in recent years; and
Technology implementation in distribution in recent years is boosting efficiency and elevating distributor ROI, enabling the company to retain channel loyalty in the current uncertain times.
We maintain a neutral rating on the stock from a one-year perspective on account of fair valuations (58.5x FY22 EPS) and uncertain near-term recovery, especially in the B2B part of the business approximately 15 per cent of sales).
However, initiatives to grow the Growth and Pioneer categories could go a long way in revitalising medium-term sales and earnings growth, which have dropped significantly in the past four years.
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